Why high yield bonds look attractively priced

ON BONDS

Over the three decades that preceded the financial crisis, debt levels across the Western world exploded. Today, consumers, banks and even sovereign borrowers are still atoning for that 30-year debt binge.

Deleveraging is slow, painful work and, were it not for extremely accommodative monetary policy, economic growth in the West would likely be negative. The last earnings season in Europe was disappointing and economic data has been unremittingly poor. The German economy has slowed and the French economy is not growing at all. Viewed in that light, this year’s repricing of high-yield bonds may seem reasonable. But has the market, from being too bullish earlier in the year, lurched too far in the other direction? This year has certainly delivered its fair share of confidence-sapping events....